Rich Keller, Editor, Ag Professional  |   January 18, 2012 resize text

click image to zoom As late as 2006, U.S. exports of denatured and undenatured (non-beverage) ethanols, mainly from corn ethanol production, were only a little more than 300,000 gallons, but 2011 exports are projected to reach 1.11 billion gallons—not 1.1 million gallons but 1.1 billion gallons. And that 2011 total is going to be triple the 2010 export volume.

November ethanol exports were a new monthly record of 152.2 million gallons, according to U.S. government calculations. The destination for nearly half of the November shipment of U.S. ethanol was Brazil, which is a country that has always been the demon blamed for why the U.S. has had to have an import tariff to protect the U.S. ethanol industry.

It is hard to understand why the U.S. ethanol industry needs any type of protection in the form of tariff or otherwise. I can understand tax and tariff protection when the ethanol industry was struggling to get its footing, but the ethanol industry needs no protection now. What the country needs is a mandate that the ethanol produced in the U.S. goes into 15 percent, 30 percent and 85 percent ethanol mix fuels.

“American ethanol producers are the lowest cost provider of motor fuel today and have ample supplies available to help meet ethanol demand around the globe. While the preference for American producers would be to use more ethanol domestically through use of higher ethanol blends like E15, E30 and E85, overseas markets will remain a viable and important part of America’s ethanol industry,” said Geoff Cooper, vice president of research and analysis at the Renewable Fuels Association.

Let’s see more effort in countering the petroleum lobbyists and others that don’t want ethanol to take more of the U.S. fuel market. 

When the corn ethanol industry first began, corn farmers saw the potential market for their grain production and they invested in the new ethanol industry. Government assistance was justified to get the industry on its feet.

I compare the situation to that of a friend of mine who was a weekend and night photographer who was laid off by his full-time employer. The unemployment agency decided that my friend qualified for unemployment benefits and did not consider his income from his photography as a reason to reduce his unemployment monthly benefit.

My friend worked hard while unemployed to advertise his photography business and build his business so that when his unemployment payments ended, he was ready to go full time with his photography business, which was quickly successful. The unemployment assistance helped my friend get through that start-up period when many businesses fail.

That is the same situation as the ethanol industry. Government assistance helped get the business off the ground, and now it is time for government assistance to end. Large corporations are making good money by exporting and supplying the U.S. need for ethanol, too.      

It should be noted that the U.S. ethanol exports being reported did not qualify for the ethanol blender’s tax credit, as the ethanol was not blended with gasoline prior to export.

Cooper talks about the “ethanol shuffle” in that certain U.S. laws encourage Brazil to send its ethanol production to the U.S. while Brazil imports U.S. ethanol into its market. The South American country has continuously been in the world news because it is requiring high percentages of ethanol in fuels.

An explanation of the ethanol shuffle as provided by the RFA is provided here. “The heart of the issue is how both the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) are calculating carbon emissions for corn-based ethanol and Brazilian sugar ethanol. Under both the federal Renewable Fuel Standard and the California Low Carbon Fuels Standard (LCFS), the carbon footprint of Brazilian-based sugar ethanol is deemed far superior to corn-based ethanol. This results in a growing incentive for imports of ethanol from Brazil to meet increasingly aggressive carbon standards. At the same time, a struggling Brazilian ethanol industry cannot meet its own domestic demand. As such, Brazilian ethanol producers are finding it more valuable to export their product to America (and the carbon emissions that go with ocean transport) and import growing volumes of U.S. ethanol (and the same carbon emissions).”

As a side note, distillers dried grains and solubles (DDGS), with known November totals calculated, indicates DDGS exports for the entire year of 2011 will be 7.72 million tons, which would be down 14 percent from 2010’s export total of 9.03 million tons.

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Comments (2) Leave a comment 

Iowa  |  January, 18, 2012 at 01:23 PM

Why doesn't the ethanol industry fund their own infrastructure like gas stations, c-stores, pipelines, and research. Not only has the government offered them money to fill these wants but as long as the mandate is in place the Ethanol industry remains a full grown adult fed mothers milk. The ethanol industry apparently has squandered its favored status and as soon as it falls out of fashion will not survice the fallout.

iowa  |  January, 19, 2012 at 06:43 AM

It should be noted that the U.S. ethanol exports being reported did not qualify for the ethanol blender’s tax credit, as the ethanol was not blended with gasoline prior to export.
The key word is "reported". The unreported exports or E90 exports do get blenders credit subsidies. They slip under the radar because they are classified as a chemical and not ethanol fuel. This gets around the tariff structure in the EU. Currently the EU governing organization is trying to address this loophole.